How Do We Avoid the Fiscal Cliff?
Our next sprint tackles US national debt and budget deficits
The Q1 sprint on America’s problem-solving capacity has wrapped up, and we want to thank everyone who participated. Quite a few of the ideas generated in our essay contest — in particular Sol Hando’s submission — were both actionable and important, and so we don’t plan on just dropping the topic but instead hope to continue pushing on it. However, it is time for us to transition to our next quarterly sprint, and this time the topic is:
Debt and Deficits
For decades the question of US federal debt has come and gone politically, but it is now — when, ironically, there is the least political capital to deal with it — that we are truly beginning to pay the price. The simple reason is that under the Zero Interest Rate Policy world following the 2008 financial crisis, the federal government accumulated enormous levels of debt at very low prices. Now that interest rates have moved up again, and plausibly could move higher, we are beginning to pay the price for that policy decision. Today nearly 14% of all federal spending — roughly $970 billion in FY2025 alone — is consumed by interest payments, making them the third-largest line item in the entire federal budget, behind only Social Security and Medicare.
This is to say nothing of our impending entitlement crisis. Both Social Security’s primary trust fund and Medicare’s Hospital Insurance trust fund are projected to run dry in 2033, at which point we will be forced either to shift those expenses into the general fund — out of their arithmetic fantasy — or to accept the statutory cuts: a 23% across-the-board reduction in Social Security benefits and an 11% cut to Medicare hospital payments.
Our accumulating debt burden is creating a fiscal cliff and crowding out government investment, all while undermining confidence in the US dollar as a safe haven and so jeopardizing our exorbitant privilege. Figuring out how to solve it, then, is one of the most important questions we face. Many people, including many think tanks, have tried to address this problem before, and so what we are looking for are really bold, asymmetric ideas on how we can begin to get ourselves out of this mess.
The Essay Contest is Back
The single best thing we did last sprint was the essay contest format, and we’re running it again the same way: you will publish on your own Substack as you go, iterate in public, learn from each other, and submit your best work by the deadline.
We will be publishing another article with the full rules, prize pool, and submission instructions later this week, but you should start thinking now.
Very excited about this! I will seriously consider participating in the essay contest this time.
You're not meant to avoid the fiscal cliff. The fiscal cliff is meant to occur when the Boomers have left the stage. It's only meant for the Boomers to avoid it.